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Regulatory fragmentation and corporate innovation

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  • Xu, Hongkang

Abstract

Using a distinctive measure derived from the Federal Register, this study examines the relation between regulatory fragmentation and corporate innovation. While regulatory fragmentation is commonly perceived as a barrier due to increased compliance costs and operational complexities, I find a significant positive association between regulatory fragmentation and innovation outputs, a result that remains consistent across various robustness tests. This effect is particularly pronounced in older firms, those with considerable regulatory influence, large market shares, and firms operating in similar regulatory environments. The results challenge the predominantly negative perceptions surrounding regulatory fragmentation in policy discussions, highlighting its potential to significantly enhance a firm’s innovative capabilities.

Suggested Citation

  • Xu, Hongkang, 2025. "Regulatory fragmentation and corporate innovation," Journal of Empirical Finance, Elsevier, vol. 82(C).
    • Handle: RePEc:eee:empfin:v:82:y:2025:i:c:s0927539825000362
    DOI: 10.1016/j.jempfin.2025.101614
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    Keywords

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    JEL classification:

    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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